Rob McEwen has been a dominant presence in gold mining since he founded and, as chair and CEO, built Goldcorp—now among the world’s largest gold companies—into an industry leader. Today he’s chair, CEO and 25%-owner of McEwen Mining, a TSX- and NYSE-listed gold and silver producer infused with its “chief owner’s” independent spirit. Here, in conversation with governance and leadership adviser David W. Anderson, McEwen weighs in on topics ranging from market regulators and tax policy, to board composition and the rights and responsibility of ownership—and sheds light on the motivations that move him.
David W. Anderson You started as an outsider in the mining industry and now you are one of its most recognizable names. Was being an outsider an advantage?
Rob McEwen Yes, very much. I grew up in the investment industry and I focused on gold mining companies and gold bullion. Eighteen years later, I jumped into the mining industry. I’m not a geologist or a mining engineer, so I was an outsider. I brought a different perspective to the problem statement and even defined the problem statement differently. It allowed me to generate a different set of alternatives than the people trained in the industry. As a stranger, I didn’t hold the same underlying assumptions but my learning curve was steep so I asked “Why?” a lot! This questioning has allowed me to generate alternatives that seemed crazy or naïve to the many in the industry. This gives a definite advantage.
David W. Anderson You’re impatient, creative and embrace big and risky ideas. I think you like being a shit disturber. And you’ve been richly rewarded for your efforts. Ring true?
Rob McEwen I like to push boundaries. I won’t stand in line because if I did, I would only get to where I wanted to go as fast as the people in front of me. By that time, the opportunity may have been lost. Innovation is an area I enjoy and it can produce huge gains in a mature industry, such as mining. Whereas, I believe the rapidly expanding scope and volume of securities regulations, corporate governance and public accounting practices is a rapidly growing cancerous expense for shareholders. I detest the complexity and resultant confusion, time delays, and the cautionary and ass-covering behaviour of boards. I want my board to help build value for our shareholders and not be preoccupied ticking off all the boxes.
David W. Anderson Let’s explore where you’re thinking leads in a handful of areas, starting with the mining industry itself. At Goldcorp’s Red Lake mine, you had a strike that lasted a staggering 46 months until May 2000. How did you think about your interaction with the union?
Rob McEwen When I took control of the company, the Red Lake mine had been in operations for 40 years, it had been starved of capital, it was a high-cost producer with a history of poor labour relations. In addition, the price of gold was falling and threatening the mine’s existence. I believed we needed to make big changes in how we operated with the union in order to survive. We needed new skills and the right attitude. We started with a total rewrite of our collective agreement with the union. They disagreed and went on strike. Every time we went back to the negotiating table, our offer to the union was less than the one before. The economics of the mine didn’t support their demands. While we stopped mining during the strike we dramatically accelerated our exploration program and found a lot more gold, we invested in automation and technology that lifted the mine from 19th to late-20th century. When the strike ended the union decertified and walked away. We became a very profitable business with a state-of-the-art mine, a committed workforce and no union.
David W. Anderson The regulatory environment itself gives us several areas to explore. What’s your thinking on rules for when a company has to get shareholder approval for dilution?
Rob McEwen Some of the rules are inconsistent and unfair to shareholders. For example, the TSX has a rule, which I fought for, that requires a company to get shareholder approval when it plans to issue more than 25% of its stock to make a takeover. Yet in a recent bought deal, Romarco Minerals issued 70% of its equity on a private placement and wasn’t required to obtain shareholder approval. Why weren’t shareholders asked to approve such a large dilution?
Rob McEwen We’re forced to produce large volumes of mind-numbing, boilerplate disclosure that does not serve the public interest. We should be creating documents that are short, concise, and easily and quickly understood by all! Instead we are required to give our shareholders materials written in the obtuse language of lawyers and accountants. The more rules we have the easier it is for the criminally minded to prosper.
David W. Anderson Regulators try to drive corporate accountability at the top by requiring CEOs to sign off on disclosures. Has this been useful to the public, reducing risk?
Rob McEwen The idea that a CEO knows of everything that’s happening in their company is ludicrous. No, I do not believe it reduces risk. Securities regulators have failed to prevent some massive corporate disasters despite their proliferation of rules. Here are a few examples: Enron, Bernie Madoff, BreX, the mortgage frauds and financial collapse of 2008. If someone is intent on stealing from their shareholders the rules provide lots of room to hide.
David W. Anderson There’s increasing pressure on boards to adjust their board composition in favour of greater gender diversity. How do you think about constructing a useful board?
Rob McEwen I look for skills, operational backgrounds, entrepreneurial and investor perspectives, and a willingness to make a large financial investment in the company. I don’t think one should be on a board just because of their sex. Historically, the mining industry has been male-dominated due to the nature and location of the work. It was hard physical work in remote locations and not attractive to many men let alone women. In the past 30 years, mining has changed significantly with new technologies, more interaction with local communities and exercising greater care for the environment. And as a result, women are seeing more employment opportunities in the industry. There’s no question in my mind that women, over time, will represent an ever larger percentage of the directors of mining companies. Currently, women represent 30% of my board of directors and I expect that percentage will increase because of their talent not regulation.
David W. Anderson What advice do you have for government on competitiveness and tax policy?
Rob McEwen Reduce the regulatory hurdles and delays, have a clear statement of regulations and tax policies. Do not change the rules after the investment has been made. Building infrastructure that will improve the primary business and encourage the growth of related secondary and tertiary businesses. Low corporate taxes, no corporate subsidies or grants. Ensure the legal system administers the law quickly, fairly and without bias. Personal safety and freedoms must be a high priority. Have a national securities agency. Have a national vision and goals and encourage investments in industries that are aligned with the vision and goals. Eliminate deficits and significantly reduce national debt. In other words, be fiscally responsible, accountable and transparent. Educate their citizens about the benefits of the businesses the government has encouraged to establish in their country. Resolve and settle native land claims that impede development. Eliminate direct payroll deduction of union dues.
Sadly, governments generally make legislation the same way as someone would drive a car forward by looking in the rear view. Their timing is wrong. By the time their laws come into effect, the economic circumstances have changed.
David W. Anderson How well is the government addressing First Nations land claims?
Rob McEwen It’s a failure. Recent legislation has only made matters much more difficult for developing Canada’s large resource potential because it has introduced greater uncertainty and cost. There is no accountability, deadlines or transparency. In another country the process that our government has put in place here could be called bribery there.
David W. Anderson Mining companies have learned the language of corporate social responsibility. How do you distinguish between philanthropy from business-based community building?
Rob McEwen The expenditure of corporate funds is justified only for community building that benefits the growth of the business—local hospitals, education and infrastructure such as roads and water systems, etc. There has to be a direct link to the business and the ability of the corporation to afford it. My view is that philanthropy is a personal matter; if the request doesn’t relate to the business but the CEO would like to support it then the CEO should pay for it personally. That is what I do.
David W. Anderson Your business card says you’re the “Chief Owner.” What does this mean to you?
Rob McEwen It means McEwen Mining is being run by an owner, by its largest shareholder who has a very clear alignment with the interests of all shareholders. I take no salary, receive no bonus and have no severance package. I have invested $126 million to own 25% of the company. I will make money the same way as all my fellow shareholders will. That is with a higher share price.
David W. Anderson You wear three hats as owner, director and manager. What is the proper role of investors or owners in corporate decision making?
Rob McEwen Money talks. I believe that the investor who puts up the most money should have the biggest say in the management of the company.
David W. Anderson Do you distinguish between an owner and an investor?
Rob McEwen That’s a good question. If an investor holds your stock for a week and is on the shareholder register at the time of the record date for the annual meeting they are entitled to vote. Let’s say this investor votes against management’s recommendations, then sells those shares before the AGM. Should this short-term investor have such a say in the affairs of the company? Should there be a minimum holding period for an investor to be considered an owner who can vote? I think there should be one.
David W. Anderson In the mining industry, how do you discern talent versus luck in performance?
Rob McEwen Success has many authors and definitely luck is one of them. After all, we are dealing with mother nature, politics and market cycles all of which can provide both pleasant and unpleasant surprises. The industry has many talented and hard-working individuals. Some make discoveries but the majority don’t. Some discoveries are made in countries where it is taken away from you, some discoveries happen when investors don’t care about it, such as the last three years, and some discoveries occur where many have looked before and not found anything. Talent will give you a better chance of finding a discovery and of running a mine, however you could call it luck when you are in the right country with the right politics at the right time of the market cycle and you and your shareholders make a fortune.
David W. Anderson Given your experience, how should an investor think about the mining industry?
Rob McEwen Perception of risk varies greatly from person to person. A risk adverse individual might agree with Mark Twain, who once said that “a gold mine is a hole in the ground with a liar at the top of it.” For these individuals I say, “If you don’t like that risk, don’t invest.” Mining is a cyclical industry and large share-price swings occur regularly. And some discoveries can create quick and massive wealth. I was attracted to the industry for these very reasons. I believe the prices of gold mining companies are at the bottom of their cycle and that today is a good time to be investing in the industry.
David W. Anderson In your stories, I hear a strong, underlying code that seems to guide you in life and business. What would you say is important to you?
Rob McEwen I value honesty, self-reliance, personal accountability, fair play, simplicity and a clear sense of purpose. I strive to create capital gains for my shareholders and at the same time build value in the communities where we operate. Outside of business, I am passionate and invest my philanthropic dollars to improving our healthcare and educating our next leaders and entrepreneurs. Also I wonder about when and how we Canadians will share a single national vision and have goals to achieve in the next 10, 25, 50 and 100 years. And I struggle with the thought that our country’s current aimless course in an increasingly competitive world will render our children tenants in a land we now own.
David W. Anderson, MBA, PhD, ICD.D is president of The Anderson Governance Group in Toronto, an independent advisory firm dedicated to assisting boards and manage- ment teams enhance leadership performance. He advises directors, executives, investors and regulators based on his international research and practice. E-mail: firstname.lastname@example.org. Web: www.taggra.com
Rob McEwen — Biography
Primary role Chair and CEO, McEwen Mining Inc.; chair, Lexam VG Gold Inc.
Current directorships Induce Biologics Inc.
Founder, former chair and CEO Goldcorp Inc.
Education MBA, Schulich School of Business, York University; BA, University of Western Ontario
Philanthropy McEwen Centre for Regenerative Medicine, Toronto General Hospital; Schulich School of Business; McEwen Leadership Program, St. Andrew’s College
Volunteer roles Global Advisory Council, International Society for Stem Cell Research; Vision Circle, Board of Trustees, X-Prize Foundation; Dean’s Advisory Board, Schulich School of Business
Honours > Queen Elizabeth II Diamond Jubilee Award > Order of Canada (2007) > Lifetime Achievement Award, Canadian Youth Business Founation (2007) > Most Innovative CEO, Canadian Business (2006) > Honorary Doctor of Laws, York University (2005) > Outstanding Achievement Award (Philanthropy), Canadian Museum Association (2004) > Ontario Entrepreneur of the Year Award (Energy), Ernst & Young (2002) > MacMillan Award for Developer of the Year, PDAC (2002) > Fast Company’s “The Fast 50,” Champion of Innovation (2002)
Years of board service 28
Photography: Jeff Kirk.